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Bookkeeping Transactions Level 2 > Chapter 2- Financial Documents for Sales > Flashcards

Chapter 2- Financial Documents for Sales Flashcards

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1
Q

What are the 7 different financial documents?

A
  • price quotation
  • purchase order
  • delivery note
  • invoice
  • returns note
  • credit note
  • statement
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2
Q

What is a price quotation?

A
  • when the buyer finds out the price of the product(s)

- can be done by looking at the catalogue/website or written/telephoned enquiry

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3
Q

What is a purchase order?

A

-a document issued by the buyer of goods and services, sent to the seller, indicating the goods/services required

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4
Q

What’s included in a purchase order?

A
  • purchase order number, specific reference number, catalogue number, quantity of goods, description of goods
  • it will also be signed and dated by someone in charge of purchasing
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5
Q

What is a delivery note?

A

-a document sent by the seller to the buyer with the goods, detailing what has been sent

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6
Q

What is included on a delivery note?

A
  • the delivery note number
  • the method of delivery
  • purchase order number
  • catalogue reference number
  • description
  • quantity supplied
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7
Q

What is an invoice?

A

-a document issued by the seller of goods or services indicating the amount owing and the required payment date

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8
Q

What is included on an invoice?

A
  • the goods ordered
  • the price quoted
  • discounts offered
  • VAT due on items ordered
  • total amount owed
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9
Q

What addresses can be included on an invoice?

A
  • seller of goods
  • where invoice is being sent
  • where the goods are sent
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10
Q

Details about the goods set out on an invoice are:

A
  • product code
  • description
  • quantity supplied
  • price
  • unit
  • total
  • discount %
  • bulk purchase
  • net total
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11
Q

Totals and VAT included on an invoice:

A
  • goods total which is an amount due to seller
  • VAT @ 20% of any deduction of any cash discount
  • total amount: VAT plus goods total
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12
Q

What kind of terms of payment are included on an invoice?

A
  • net monthly
  • carriage paid
  • e & oe
  • settlement discount
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13
Q

What is a Net Monthly term?

A

-full payment should be made within a month of the invoice date

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14
Q

What is an E & OE term?

A
  • stands for errors and omissions excepted

- if there is an error, something missing on an invoice by mistake, the supplier can demand the right amount

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15
Q

What is a Carriage Paid term?

A

-when the price of goods includes delivery fee

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16
Q

What is a settlement discount?

A

-a further discount given when payment is made early

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17
Q

What is a credit note?

A
  • a refund document which reduces the amount owed by the buyer
  • prepared by the seller and sent to the buyer
18
Q

When can a credit note be issued?

A
  • when goods are damaged, lost in transit, faulty
  • when there are missing goods
  • when there is an incorrect unit price
19
Q

What is a unit price?

A

-a price quoted in terms of a standard unit of product or service

20
Q

What is a statement of account?

A

-a document issued by the seller to the buyer summarising invoices, credit notes issued and payments received and the amount owed

21
Q

What does the statement of account contain?

A
  • balances at the beginning of the month (debit)
  • payments received (credit)
  • invoices issued (debit)
  • refunds made on credit note (credit)
  • running balance
  • final total of all items
22
Q

What is a discount?

A

-the deduction from the usual cost of something

23
Q

What is a bulk discount?

A
  • a discount given for bulk purchases

- purchases over certain amounts or quantities

24
Q

What is a trade discount?

A

-a percentage reduction in the selling price given by the seller to the buyer because of the trading relationship

25
Q

How do you calculate trade discount?

A

1) calculate total price before discount
2) calculate trade discount
3) calculate net price before VAT
4) calculate VAT
5) calculate the final total

26
Q

What is prompt payment discount?

A

-a % reduction in the selling price given if the buyer pays within a specified short period

27
Q

Ways of adjusting VAT for PPD:

A
  • issuing a credit note

- the seller includes a PPD declaration on the invoice

28
Q

What is VAT?

A
  • value added tax (VAT)

- a government tax on sales: normally calculated on invoices/ credit notes

29
Q

How is VAT calculated on a given amount?

A
  • amount * 20/100 = VAT payable
30
Q

How is VAT calculated when included but not shown?

A
  • VAT % * amount which includes VAT divide by 100 plus VAT %= VAT content
31
Q

What is a credit limit?

A

-the maximum amount the seller will allow the customer to owe at any one time

32
Q

What needs to be checked on an invoice before authorised and sent out?

A
  • the purchase order relating to the invoice
  • the sellers own record of any price quoted
  • the sellers file record of the buyer which should give the credit limit and the discount allowed
33
Q

What checks need to be made on an invoice?

A
  • correct customer
  • correct place
  • correct goods
  • correct quantity
  • correct unit
  • correct price
  • correct discount
  • correct calculations
34
Q

How to calculate a cash discount?

A

1) calculate price before trade discount
2) calculate trade discount
3) calculate net price/goods total
4) calculate settlement discount
5) calculate reduced goods total
6) calculate VAT on the lower amount
7) calculate the total invoice price (using the goods total before deduction of settlement discount)

35
Q

What is a discrepancy?

A

-an error on a financial document

36
Q

How can discrepancies occur?

A
  • the internal checking process: before it is issued

- the buyer finds the discrepancy after the doc is issued

37
Q

How can discrepancies be dealt with?

A
  • the document is sent back to the person who made the mistake and a new corrected document is issued
  • the seller apologises to buyer and a new doc is issued: the buyer shouldn’t make any changes to the doc
38
Q

Name 4 documents used in the ordering process:

A

Any from:

  • purchases order
  • delivery note
  • goods received note
  • purchase invoice
  • price quotation
  • price enquiry
  • returns note
  • credit note
  • statement
39
Q

What checks need to be made in the ordering process?

A
  • goods received and delivery note
  • delivery note and purchase order
  • invoice, delivery note and purchase order
  • calculations
  • credit notes
40
Q

What is the difference between a delivery note and a goods received note?

A
  • a delivery note details what has been sent and a goods received note details what the buyer is receiving

Bookkeeping Transactions Level 2 (11 decks)

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